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The EUR/USD pair reached a new 2026 low near 1.1430 as the US Dollar surged amid escalating Middle East tensions and persistent inflationary pressures. Geopolitical risks from the ongoing conflict, coupled with the Federal Reserve’s hawkish stance, have driven investors toward the USD as a safe-haven asset. The European Central Bank’s (ECB) policy uncertainty further weighed on the euro, with traders anticipating divergent monetary policy paths between the Fed and ECB. This divergence could prolong the euro’s weakness against the dollar. The strengthening USD poses risks for global markets, particularly for emerging economies reliant on dollar-denominated debt. Traders are closely monitoring the Fed’s upcoming meeting for clues on rate hike timing, while the ECB’s response to inflation in the eurozone remains a key variable. A sustained USD rally could trigger broader capital flows and impact commodity prices, which are often priced in dollars. For forex traders, key support levels around 1.1400 and resistance at 1.1600 will be critical in the coming weeks. Investors should also watch for developments in the Middle East conflict and inflation data from both the US and EU. A prolonged USD dominance could reshape carry trade strategies and increase volatility in cross-currency pairs.
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